In Uncategorized on 04/04/2016 at 13:25

Please pardon the Latin pun. Though it looks like I’m showing off my attendance at a high-priced law school, the pun is relevant, as Judge Morrison forces IRS, over much objection, to fork over a bunch of documents and tax returns in Gary A. Wolens, Docket No. 10853-15, filed 4/4/16.

It’s the usual property-settlement-vs-alimony pitchers’ duel. Gary paid his loved-once Roberta in excess of £1,250K over three tax years, causing IRS to head for the exchange rate button on their i-phones and sock Gary with a $650K deficiency for the year in question.

Gary wants IRS to unload a bunch of documents from those three years, during each of which Gary was losing pounds. Some of the docs are from Gary, but the rest are from Roberta for those years.

IRS says only one year is at issue, therefore the past years are irrelevant.

Wrong, says Judge Morrison. “Tax returns for successive years often involve the same or similar tax issues. Naturally, the IRS’s files for one year may contain information that is relevant to another year. This overlap is especially possible in this case, in which the petitioner made similar annual payments in the years [X, Y and Z, Z being the year at issue]. We therefore reject respondent’s categorical relevancy argument. Respondent made no other arguments regarding this request. Therefore we will order production of these documents.” Order, at p. 2.

Next at bat is the classic Section 6103 “tax return info” riposte. Roberta isn’t a party, and the docs at issue are clearly tax return info, thus confidential and privileged accordingly.

And Gary and Roberta are long since splitsville, so no “transactional” relationship. Generally (love that word!), if taxpayers are in some kind of give-and-take or back-and-forth, the return info of a nonparty might come in, if needed to establish a defense, thus “transactional”.

Judge Morrison is too polite to do what I will now do, namely, viz., and to wit, give IRS a Taishoff “Oh Please!”

Gary claims “…the documents are permitted to be disclosed under the § 6103(h)(4)(C) exception, which permits the IRS to disclose return or return information in a tax-related judicial proceeding “if such return or return information directly relates to a transactional relationship between a person who is a party to the proceeding and the taxpayer which directly affects the resolution of an issue in the proceeding”. Respondent’s [IRS’s] sole argument for why this exception is not applicable is that petitioner and Roberta did not have a ‘transactional relationship’. We disagree with respondent’s argument. Petitioner and Roberta were married and divorced. There were financial aspects to this relationship. We therefore consider the relationship ‘transactional’. See Whittington v. United States, 2014 U.S. Dist. LEXIS 133163, 2014-2 U.S. Tax Cas. (CCH) ¶ 50,455, 114 A.F.T.R.2d (RIA) 6092 (W.D. Wash. 2014); Tavery v. United States, 32 F.3d 1423 (10th Cir. 1994); Christoph v. United States, 1995 U.S. Dist. LEXIS 19977, 77 A.F.T.R.2d (RIA) 809 (S.D. Ga. 1995). Respondent made no other arguments against the application of the § 6103(h)(4)(C) exception. For example, respondent did not argue that the requested documents do not ‘directly relate’ to petitioner and Roberta’s marriage and divorce. Therefore we will order production of these documents.” Order, at pp. 2-3.

The citations are there for your next brief, but watch out for the “directly relates” gambit. Try for an in camera if IRS claims that the docs do not “directly relate.” Uncle Sam can make the pants too tight as well as too long.

Judge Morrison notes in passing an interesting coincidence.  “(We note that the [X] tax-year documents are in the possession of the Department of Justice. The Department of Justice is defending a Court of Federal Claims case brought by petitioner regarding his [X] tax year. The Department of Justice’s lawyer in that case is out of the country and will not return to work until April 4, 2016.).” Order, at p. 2.

Also out of the country but returning today, April 4, 2016, from her birthday present trip to Paris is the most wonderful four-year-old Texan, accompanied by her mother, Director at a Big Four accounting firm, who is also returning to work. Welcome home, ladies!



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